Jane Kelsey: TPP looking less attractive for NZ

Fading chance of wider dairy access in US and Japan begs question what we will actually gain under any deal.

Trade Minister Tim Groser. Photo / APN

Another ministerial meeting on the Trans-Pacific Partnership agreement (TPP) came and went last week in Singapore. No one here blinked. Trade Minister Tim Groser played it all very low key. No expectations meant no disappointment.

In retrospect, he will be relieved he didn't talk it up. But not because nothing happened. Unlike previous meetings of the ministers, this one signalled a possible breakthrough on the sticking point of agriculture.

Once that gets sorted, the ministers can pretty much work through their checklist of new rules on copyright and the internet, Pharmac's rules for cheaper medicines, foreign investors' powers to sue, data and privacy laws, and unfettered cross-border banking and capital flows.

The problem for Groser is that any deal is likely to fall far below his "gold standard" for Japan and the US to totally remove all tariffs. Without that outcome, it is even harder for the Government to justify all the downsides of the deal.

The formal statement from the ministers used the same recycled rhetoric of "meaningful progress", "narrowing remaining differences", and "building momentum". But there was a difference.

Words like pragmatism and flexibility were code for accepting that some countries with particular sensitivities cannot be pushed beyond their political comfort zone.

For New Zealand, that almost certainly means no significant new market access for dairy to Japan, the US or Canada.

This has been on the cards for some time, based on what is known of Japan's recent agreement with Australia and ongoing talks with the US. In both cases dairy appears to have achieved the least concessions of any product from Japan, except for sugar.

Groser put a brave face on it. Initial reports from specialist Inside US Trade said New Zealand might accept alternatives to full tariff elimination if countries could show another way to achieve a "very high quality result". Until then, New Zealand would stick to its demands and make no formal concessions in the other areas.

The minister went from Singapore to Japan, where he delivered a speech to a pro-TPP business forum. He tried to paint Japan as the likely losers from a pragmatic deal. But he knows that New Zealand is a minion among the 12 participating countries with no real tariffs to cut and a small, remote market.

As soon as the US and Japan agreed they would treat each country separately New Zealand was on a hiding to nothing. That point was reinforced by Canada's dairy industry lobby, who attend every meeting. They say their government has made the same (empty) offer on dairy to all countries. But if the US demands something more, they will separate it from the rest. "What does New Zealand have to offer Canada?"

These latest developments must make even the cheerleaders of the TPP very concerned.

Back in 2010, Wikileaks reported a warning from then chief negotiator Mark Sinclair that New Zealand needed to "manage expectations" of an "El Dorado" from the TPP.

Trade Minister Groser did the opposite, insisting that New Zealand required nothing less than comprehensive liberalisation - the rhetoric that Apec leaders had used in their declaration in November 2011.

Those chickens have now come home to roost. Groser is trying to reduce expectations and at the same time hold the high ground. His Government faces a growing backlash against the TPP here and demands for a full cost-benefit analysis before anything is signed. He must know that the figures won't stack up, even if they are based on the standard economic massaging.

None of this is to suggest that a deal will happen next week. There is a backlash in the US from the dairy and sugar lobbies who belatedly decided they want the same concessions Japan gave their beef industry. The US Congress is making undeliverable demands for inclusion of rules to stop what they call currency manipulation.

There is also still plenty of life in the opposition to the TPP. Just last week the Director-General of the World Health Organisation Margaret Chan said, "International trade has many consequences for health, both positive and negative. One particularly disturbing trend is the use of foreign investment agreements to handcuff governments and restrict their policy space".

The ministers have announced a "pathway for intensified engagement" in market access and rules, such as intellectual property and state-owned enterprises. That includes another "chief negotiators" meeting in early July. By not calling it "a round" they can avoid the need for any formal stakeholder presence.

The question is where the Government will draw its new red line, and what price it will make New Zealand pay for a deal that delivers few, if any, tangible returns.